On the daily chart below, we can see that compared to other currencies, the US Dollar hasn’t weakened too much. This may be because the CAD is a commodity currency and it’s sensitive to global growth and commodity prices.
The bad news out of the US like a miss in Jobless Claims, the pickup in the unemployment rate and the failure of the Silicon Valley Bank, are also bad news for the Canadian economy which has the US as the biggest trading partner.
Moreover, the US is the biggest economy in the world, and when it goes into recession the whole world is affected, which is also bearish for commodities like oil for example. In fact, we saw oil prices falling in line with the fall in the USD.
We can see on the chart that the moving averages are still clearly pointing north and the bullish trend with extensions and retracements looks healthy.
On the 4 hour chart below, we can see that price has pulled back to the upward trendline and the 50% Fibonacci retracement level. The buyers here will be fighting to push the price up as they have many technical tools all in one place.
The support at 1.3664 will be the last line of defence for the buyers as a break lower would open the door for a bigger fall towards the 1.3520 level. A lot may be hanging on the US CPI report today. In case we get a beat in the data, the USD should come back, while a miss may give the sellers control and lead to the breakout.
On the 1 hour chart below, we can see that there’s a possible inverted head and shoulders right at the trendline. This may be a sign that the buyers are piling in and are looking for a push higher.
The neckline would be at 1.3800 but a break higher of the counter-trendline would give the buyers enough conviction to start rallying and target the 1.3861 resistance without waiting for the neckline break. All of this should be considered after the US CPI report as ultimately, it’s the data that will give the direction.
